The Ministry of Corporate Affairs has put out the notification regarding provision of the Companies Act 2013 (Act). As per the notification, National Company Law Tribunal will be enabled to handle the corporate restructuring and winding up companies in addition to transfer of pending proceedings to it.
Corporate restructuring involves transformation of the organization of a business. The definition of corporate restructuring has a very wide definition and can involve things like mergers of the departments, buyout, reshuffling and also relocating staff members.
The Ministry of Corporate Affairs has brought into force provision of the Act linked with to variation of shareholders’ right, compromises, arrangements, amalgamations and reduction of share capital. All these provisions will come into effect from December 15, 2016. The components of the compromises, arrangements and amalgamations include:
- The Power vested with NCLT to implement the compromise or arrangement
- The Power of NCLT to issue a binding order for a meeting so as to provide for the compromise or arrangement with creditors and members
- Authorisation to purchase minority shareholdings, given 90% of the shareholding of the company has been acquired
- The conditions to be met in case of a scheme of amalgamation or merger
- Authority of the Central Government to furnish a notice for the amalgamation of companies for the benefit of the public
- Various other procedures and formalities required for implementation of a scheme of merger, amalgamation, arrangement or compromise.
The government has not issued any notification relating to cross-border mergers and takeover offers under a compromise or arrangement.
Corporate restructuring
Winding-Up Provisions
During the proceedings the company is dissolved and during the process assets are collected, debts are paid and the assets of the company or contribution made by the members should be done, if deemed necessary. After the process of wind up, if anything is left then it will be distributed among the members according to their rights.The ministry has given power to NCLT to wind up the powers but has put the condition that voluntary winding-up provisions will come into effect starting April 1, 201These are the powers that ministry has vested in NCLT:
- Power and jurisdiction of the NCLT and the situations in which a company will go for wind-up
- Power to NCLT in appointment, working powers, obligations and procedural compliances to be observed by a company liquidator.
- Eligibility to file a petition for winding up before the NC
Transfer Of Pending Proceedings
NCLT benches will take care of all the proceedings under the Act pertaining to compromise, arbitration, arrangements and reconstructions. After, the government will notify the implementation date, the NCLT will take from there and hear the transferred matters right from where the proceedings were paused. However, NCLT will not be given the cases that have been reserved by the High Court.
